Editorials

Amid the flood of talk about bailouts and increased governmental intervention, a Texas agency last week quietly recommended some sensible, free-market reforms that will benefit all Texans.

The state Sunset Advisory Commission made its recommendations on ways to improve Texas insurance laws. These recommendations will be considered by the Legislature when it convenes in January.

The problem has long been obvious, the Texas Public Policy Foundation says.

"Why do Texas homeowners pay insurance rates that are much higher than the national average? And why can't coastal residents obtain private windstorm insurance coverage?" the Foundation's Drew Thornley asks. "Weather plays a role -- Texas endures arguably the most severe and wide-ranging weather risks in the nation -- but so does Texas' unreasonably burdensome regulatory structure."

There's simply too much intervention from the state.

"The Texas Insurance Code permits the Texas Department of Insurance (TDI) to reject filed rates before they are used in the marketplace. This runs against the Texas Legislature's stated preference for a file-and-use regulatory system, where insurers may use rates immediately after filing them," he explains. "Such pre-market regulation costs insurers -- and thus consumers -- time and money."

Of course, the TDI says its rules are to prevent insurers from charging excessive rates and gaining "unreasonably high" profits.

"But what is 'excessive' for one person is not necessarily 'excessive for another," Thornley points out. "And why should a government agency get to decide what is an 'unreasonably high' profit? One effect of such meddling is that fewer insurance companies want to do business in Texas - and the lack of competition actually drives prices higher.

"There is simply no one-size-fits-all solution for insurance prices, and attempts to impose one wreaks more havoc on consumers than the supposed problem," Thornley says.

The Sunset Advisory Commission has recommended some sensible fixes.

"It recommended measures that will provide insurers greater clarity and predictability during the rate-setting process," Thornley says. "More regulatory certainty will attract companies to Texas, expanding the choices available to consumers. The Commission's recommendations strengthened the transition to a true file-and-use regulatory system. If the Legislature follows suit next session, rates will respond more quickly to market conditions, and more insurers will compete aggressively for Texas consumers."

Texans weather enough storms already, he says. We don't need additional financial pressures.

With these reforms in place, Thornley concludes, "Texas' homeowners' insurance market will be better equipped to handle and Texas' tax dollars will be at much less risk from the next catastrophic storm to strike our coast."

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